OSK Holdings will maintain its listed status after the merger with RHB and look for other businesses - founder and major shareholder Ong Leong Huat

(OSK closing stock price yesterday (28.5.2012) was RM 1.74)

OSK Holdings Bhd plans to maintain its listed status and look for other businesses to embark on once it sells off its investment bank, its founder says.

The group will be without a core business once it sells off OSK Investment Bank Bhd to RHB Capital Bhd (RHBCap), which leaves it at risk of becoming a Prcatice Note 17 (PN17) company.

Still, founder and major shareholder Ong Leong Huat, 67, points out that the group will still have some other businesses remaining like property, property-management and money-lending.

"Along the way, my board and I - which also comprise a lot of good business people - will look at what other businesses we can embark on.

"Today, the (investment banking) deal is not fully completed, (so) we can't tell you what we are going to do next. As a businessman, if you have the resources, definitely you'll know what to do," Ong told reporters after the group inked a conditional share purchase agreement with RHBCap here yesterday.

The veteran stockbroker, which has a 32.1 per cent stake in OSK Holdings, is ranked the 30th richest person in Malaysia by Forbes, with a net worth of US$265 million (RM832 million).

According to a source, the group is looking to develop land next to its headquarters in Jalan Ampang here.

OSK Holdings is selling OSK Investment to RHBCap for RM1.95 billion and will be paid for it with 245 million new RHBCap shares and RM147.5 million in cash. The deal is expected to be completed in the final quarter.

"It is the intention of OSK Holdings to maintain the listing status... and apply to Bursa Securities for a waiver from being classified as an affected listed issuer pursuant to PN17 of the listing requirements," OSK Holdings said in a stock exchange filing yesterday.

Ong built up the group into a regional business with a revenue of over RM1 billion since taking it over in 1982. It now has about 80-90 outfits across eight countries.

"This (investment banking) is a very volatile business. The market can enter into a tsunami at any time, any moment... just look at how many such turbulences have occured in the last 10 years," he remarked.

OSK Holding's shares, which have shed 2.2 per cent so far this year, lagging the FBM KLCI's 1.6 per cent gain, closed four sen higher to RM1.74 at noon yesterday before they were suspended pending the announcement.

Source: www.btimes.com.my

RHB OSK Merger Update: RHB Capital to purchase OSK's Investment Banking business, to be settled via RM 174.3 million cash and 245 million new shares to be issued by RHB (10% stake)

(OSK closing stock price today (28.5.2012) was RM 1.74)

(RHBCAP closing stock price today (28.5.2012) was RM 7.40)

OSK Holdings Bhd (OSKH) is disposing of its investment banking business to RHB Capital Bhd for RM1.97bil to be satisfied via new RHB Cap shares and RM174.3mil cash, which would see OSKH getting a 10% equity stake.

OSKH said on Monday it would dispose of its 100% stake in OSK Investment Bank Bhd (OSKIB); 20% of OSK Trustees Bhd; 20% of Malaysian Trustees Bhd and 100% stake in OSK Investment Bank (Labuan) Ltd.

The total disposal consideration of RM1.977bil would be satisfied through the issuance of 245.0 million new RHB Cap shares to be issued at an issue price of RM7.36 per RHB Cap shares and cash of RM174.3mil, it said.

"The proposed disposal will enable OSKH to unlock the value of its investment in OSKIB Group, whilst the consideration shares to be received by OSKH will allow OSKH to equity account a prospective 10% stake in RHBC, which is a more liquid investment form compared to OSKIB," it said after entering into a conditional share purchase agreement with RHB Cap.

OSKH said the disposal consideration was based on OSKIB's unaudited consolidated net assets of RM1.102bil as at Sept 30, 2011 or at a price to book ratio valuation of about 1.77 times.

It added the issue price of the new RHB Cap shares of RM7.36 and the number of new RHB Cap shares to be received as part of the disposal consideration would be 10% equity interest in RHB Cap as at Dec 31, 2011.

"The issue price of RM7.36 represents a slight premium of 0.27% to the five-day volume weighted average market price of RHB Cap shares up to and including May 25, 2012 of RM7.34," it said.

OSKH added the cash portion of RM174.3mil would be used to defray the estimated expenses for the proposed disposal, repayment of bank borrowings of OSKH group and to fund OSKH's on-going businesses.

It also said the unaudited net assets of OSK Trustees, Malaysian Trustees and OSKIB Labuan as at June 30, 2011 were about RM5.13mil, RM9.15mil and RM21.61mil respectively.

Source: www.thestar.com.my

RHB and OSK Merger Update: RHB Capital and OSK Holdings receives approval from Securities Commission for merger

(OSK opening stock price today (25.5.2012) was RM 1.64)

(RHBCAP opening stock price today (25.5.2012) was RM 7.42)

RHB Capital Bhd and OSK Holdings Bhd have received approval from Malaysia's Securities Commission (SC) to merge RHB's banking group with OSK's investment bank, according to a filing with Bursa Malaysia.

"Further details on the possible merger will be announced upon the execution of a conditional share purchase agreement between OSK and RHB," OSK said yesterday.

The Finance Ministry gave its approval on April 28.

The merged entity will become the country's biggest domestic stockbroker, overtaking CIMB Group Holdings Bhd

Source: www.btimes.com.my

RHB and OSK earlier on 27 April obtained approval from Ministry of Finance for the proposed merger.

OSK acquisition will add to RHB's existing leverage and may affect ability to pay dividends and repay debts, but benefits and synergies on cross-selling from complementary client bases outweighs - Credit rating agency Moody's

(OSK closing stock price today (8.5.2012) was RM 1.65)

(RHBCAP closing stock price today (8.5.2012) was RM 7.56)

RHB Capital Bhd's (RHBCap) acquisition of OSK Investment Bank Bhd will subject RHB Group's profitability to greater volatility as it shifts its business mix towards riskier and market-sensitive activities, Moody's Investors Service Singapore Pte Ltd said.

The credit ratings agency said the merger is credit negative for RHB Group and its wholly-owned commercial banking subsidiary, RHB Bank Bhd.

"The acquisition will add to RHBCap's existing leverage, thereby adding pressure on its banking arm, RHB Bank Bhd, to devote more dividends to fund both the holding company's debt repayments and the group's dividend payments," its analyst Simon Chen said in a report yesterday.

"This greater pressure to direct more profits to the holding company will diminish RHB Bank's ability to retain profits to replenish its capital for further business growth and improvements in its capital adequacy," he added.

With total assets of RM10.2 billion (US$3.4 billion) at end-2011, OSK is 7% of the size of RHB Group.

"We estimate the inclusion of OSK will increase the proportion of RHB Group's assets in investment banking business to 10% from 4%, and shift its business mix towards riskier and market-sensitive activities that will subject its profitability to greater volatility," said Chen.

RHB Group has a policy of paying 30% of its profit as dividend. RHB Bank constitutes 94% of the group's assets and contributes 98% to its income, making the holding company heavily reliant on RHB Bank's distributed profits.

In addition, the impending integration with OSK may present a formidable management challenge as RHB Group has already experienced several top-level departures since the beginning of 2011.

"A failure to retain key personnel, especially in OSK's core investment banking business, will raise further questions of whether the holding company has sufficient resources to manage the risk created by the merger," said Chen.

Assuming RHBCap pays two times OSK's book value for the purchase and that the payment is 50% in cash and 50% newly issued equities, Moody's estimates that RHBCap's double leverage ratio will increase to 159% from 149%, based on 2011 financials.

"If the payment is made entirely in cash, we estimate its double leverage ratio will surge to 195%," said Chen. As at end-2011, RHB Bank's core Tier 1 ratio was 11.2%, slightly below the industry average.

On a positive note, Moody's said the addition of OSK IB to RHB Group will increase the holding company's and RHB Bank's regional operations and accelerate its growth in Southeast Asia, which is consistent with RHB Group's regional expansion plans.

"In addition, the merging companies' client bases are complementary, which adds to synergies on cross-selling and product capabilities. However, these benefits are more than outweighed by the merger's effect on RHB Group's and RHB Bank's credit profiles," said Chen.

On April 27, RHBCap received the Ministry of Finance's nod to merge with OSK IB through a share purchase, the details of which the companies will finalise later.

Source: www.thesundaily.my

OSK Holdings : Week 18 (30 April-4 May) Stock Picks Commentary

Stock Picks #2

OSK Holdings Berhad (OSK)

Week high : RM 1.74 (Up 18 sen – 11.5%)

On 27 April, OSK Holdings announced that it has obtained Ministry of Finance’s approval for the proposed merger with RHB Capital.

Earlier on the same day, OSK CEO has U Chen Hock indicated that OSK has yet to receive go-ahead from Bank Negara and may take up to 4 to 6 months to finalise the deal once approval is obtained.

Market reacted positively as the merger is seen to potentially be beneficial to OSK shareholders even though the pricing valuations and way of settlement (cash or shares) are not yet determined and agreed by both parties.

This merger is attractive and important to RHB as it would place them as the country’s largest stockbroking firm with nearly 15% market share if the merger goes through.

Do take note that on 24 June 2011, negotiations on potential merger exercise between RHB and Maybank and CIMB was called off due to wide gap in price expectations. Maybank and CIMB were not willing to pay 2.25 times book value of RHB Cap.

OSK stock rose 11.5% (18 sen) since 27 April to week’s highest RM 1.74 on 2 May and closed at RM 1.69 at the end of this week.

Click Here for all latest posts on OSK Holdings

Merger with OSK will make RHB the largest stockbroking firm in Malaysia with nearly 15% market share, overtaking CIMB Securities, which has a 10.5% share

(OSK closing stock price yesterday (30.4.2012) was RM 1.71)

(RHBCAP closing stock price yesterday (30.4.2012) was RM 7.37) 

A conditional share purchase agreement between RHB Capital Bhd and OSK Holdings Bhd could be signed in one to weeks, after the Finance Ministry (MOF) gave its nod for their proposed merger last Friday, CIMB Research said.

“By then, the details of the deal will be disclosed,” it said in a report, adding that the news of MOF’s approval was not a surprise “as we did not expect any issues to hinder the deal and the negotiations were progressing smoothly”.

StarBiz reported on Friday that the merger was believed to have received the green light from the central bank and was awaiting a decision from the ministry.

Various obstacles had delayed the merger from its original first-quarter completion target, such as securing the approvals of overseas banking and financial regulators, the need to iron out “political and management” issues, and the search for a “neutral” investment banking head.

An analyst told StarBiz that OSK director and major shareholder Ong Leong Huat was the most likely candidate to head RHB’s enlarged investment banking (IB) arm given his years of experience as a stockbroker.

He said it was probable too that OSK’s IB team would be picked to run RHB’s IB business, following some high-level departures at the latter in recent years.

Ong built OSK into the fourth largest retail broker in the country just behind RHB, and other listed companies in his stable include OSK Property Holdings Bhd and OSK Ventures International Bhd.

Kenanga Research in note dated April 19 cited culture shock as a key impediment holding back the merger. “RHB operates under a conservative approach while OSK IB is more of an entrepreneur-driven IB that is more aggressive and risk-taking.” .

Nonetheless, it said the proposed merger would be beneficial in the medium to long term.

“We believe OSK IB is strategically an ideal fit for RHB and will add significant diversification of clienteles and scale in the capital market and also provide an immediate access for RHB into other Asean markets.”

Meanwhile, Alliance Research analyst Cheah King Yoong believes the mode of settlement for the merger exercise would be via a combination of cash and new shares.

A 100% share offer, he pointed out, could dilute RHB Cap’s earnings, which might not allow the acquiring company to fully optimise the synergistic benefits, while an all-cash settlement may might be ideal for management retention and could be negative from a cashflow standpoint.

The merger will make RHB the country’s largest stockbroking firm with nearly 15% market share, overtaking current top-seater CIMB Securities, which has a 10.5% share.

It will become the fourth largest financial services group by assets and see its footprint expanded to markets like Indonesia, Cambodia, Hong Kong and China.

OSK has stockbroking operations in Indonesia, Cambodia, Hong Kong, Thailand and China, and RHB has presence in Singapore, Thailand and Brunei.

Source: www.thestar.com.my

RHB and OSK merger update - Minister of Finance's approval for the proposed merger has been obtained!

(OSK closing stock price today (27.4.2012) was RM 1.56)

(RHBCAP closing stock price yesterday (30.4.2012) was RM 7.25)

RHB Capital Bhd and OSK Holdings Bhd have received the Minister of Finance's (MoF) approval for the proposed merger of the businesses of the RHB Banking group and OSK Investment Bank group.

They announced to Bursa Malaysia on Friday they had received notification from Bank Negara Malaysia (BNM) about the MoF's approval, confirming The Star report.

They said the terms and conditions of the proposed merger would be announced subject to the execution of the conditional share purchase agreement for the proposed merger.

The Star reported the merger deal is believed to have received BNM's nod and was awaiting approval at the Finance Ministry level.

It also reported that while most analysts had expected this nod, some industry players expressed surprise the issues said to have held up the approval process could be resolved so fast.

The news report said among the issues apparently were those related to pricing; talk that CIMB was still interested in RHB, hence the rationale for RHB buying OSK; and that most department heads proposed for the investment bank were purportedly from OSK.

Source: www.thestar.com.my

Proposed merger between OSK and RHB yet to receive go-ahead from Bank Negara - OSK CEO U Chen Hock

(OSK opening stock price today (27.4.2012) was RM 1.52)

(RHBCAP opening stock price today (27.4.2012) was RM 7.25) 

The proposed merger between OSK Investment Bank and RHB Capital Bhd (RHBCap) may take up to six months to be finalised once it receives the go-ahead from Bank Negara, OSK chief executive officer U Chen Hock said.

"We need four to six months to finalise everything," he told reporters during the handover of OSK investment education room to Tunku Abdul Rahman College (TAR College) here yesterday.

He said this when asked whether the deal could be concluded by the third quarter of this year.

RHBCap group managing director Kellee Kam was reported to have said that it hopes to conclude its takeover of OSK in the third quarter after the bank's shareholders meeting earlier this month.

Both companies had applied for the central bank's approval for their merger on January 11.

U said RHBCap and OSK are still waiting for the Bank Negara's response, adding that he will only give an update on the proposed merger upon receiving the approval.

"Recently, during the annual general meeting, we have made our comment on where we are now. Nothing has changed... there is no further progress. We are still waiting for Bank Negara to give us the greenlight. At this stage, that's all we can say," he said.

He also declined to comment on reports that the proposed merger, due to be sealed soon, will be paid via share swaps.

Yesterday, OSK handed over the investment education room to Tunku Abdul Rahman College (TAR College) as part of the prize awarded to the college for emerging top in the campus category of last year's OSK Investment Challenge (OSKIC).

The challenge is an online trading competition designed to educate and inspire students on the workings of the capital market by providing an avenue for them to experience it first hand, as virtual investors, within a simulated stock market.

TAR College beat more than 300 campuses nationwide to emerge champion with the highest combined portfolio calculated based on the total scores of the top 100 participating students from each campus.

U said OSK feels the OSKIC has met its objective, judging from the increasing number of participants since it was launched in 2010.

OSKIC could be held every year in the future, he said, adding that OSK aims to build a new generation of potential investors and create awareness on stock market trading as a viable form of value investing.

Source: www.btimes.com.my